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The Government Programme establishes a foundation for strengthening the public finances and the prerequisites for sustainable growth. But unless the means for achieving growth are expanded, even a balance in the public finances will be impossible to maintain. And without sustainable public finances, the operating conditions for households and businesses operate will deteriorate.

There is still work to be done to improve the financial system’s resilience to crises. Key steps would include a stronger cap on household borrowing in Finland, and a common system of protection for bank deposits across Europe.

Finland’s general government debt ratio has grown almost without interruption since the global financial crisis. This trend differs significantly from that seen in the other Nordic countries. It is vital to build a strong political commitment to fiscal sustainability and to the resolute implementation of the measures this calls for.

Monetary policy tightening will continue so that price stability can be safeguarded. Managing the energy crisis and keeping wage increases at a moderate level are key factors for the euro area’s price and growth outlook.

Inflation is climbing, and interest rate rises will start soon. Household purchasing power was growing for a number of years, but now the situation is different. If we have the patience to look beyond the inflation spike, then competitiveness can be retained and the purchasing power of employees can be strengthened in future years.

We need to set limits to household indebtedness, such as a debt ceiling, and banks’ ability to withstand crises should be improved. Banks should also be adequately prepared for cyber risks.

Although inflation will remain faster than in recent years longer than previously expected, many of the factors driving it are by their nature transitory and expected to largely cease to apply during the course of 2022. There is, nevertheless, considerable uncertainty. In Finland, we need reforms to strengthen the prospects for economic growth.

Growth in the euro area economy is robust, but the outlook is overshadowed by production bottlenecks and the possibility of new coronavirus variants. Monetary policy will maintain favourable financing conditions for a sufficiently long period for the economy to continue its recovery.

The long-term outlook for the Finnish economy is subdued by weak productivity, a low employment rate and an ageing population. These will limit the public finances’ ability to service debt.

The ready availability of finance has eased the position of households during the pandemic, but at the same time it accelerates the accumulation of debt. Indebtedness should be reined in with a debt-to-income cap and limits on the duration of housing loans.

Economic policy in Finland must find a way to live in two time periods at once. While we are currently combating an acute crisis, we must at the same time direct our thinking strongly towards the economic challenges of the post-crisis years.

Monetary accommodation has opened up space for other economic policies in the euro area, which needs to be put to good use by pursuing economic reforms. Productivity and employment growth ultimately rest on our ability to reform.

Over the past decade the tools for implementing monetary policy have become ever more diverse. These measures now include refinancing banks at favourable terms and large-scale asset purchases.

Healthy public finances provide an irreplaceable shield when we hit hard times. It is important to focus the fiscal policy stimulus effectively and take forward structural reforms. Finland’s labour market, too, has a vital role to play as the economy enters the recovery phase.

Financial institutions' solvency and liquidity positions have been strengthened since the global financial crisis. A well-functioning banking sector together with government relief measures will bolster the economy's outset for growth once the crisis subsides.

The Finnish economy is still going through a period of transition in which it has to adjust to two large structural realignments.

Slower-than-target inflation and a persistent decline in inflation expectations are key challenges for monetary policy. A negative equilibrium of prolonged low inflation and zero interest rates would fundamentally weaken monetary policy’s room for manoeuvre in balancing fluctuations in the economic cycle.

Active measures to strengthen the public finances should be taken when the economy is in good heart.

Finnish households have a worrying level of debt. Advance measures should be taken to prevent the accumulation of excessive debt.

A review of the ECB’s monetary policy strategy is due in light of the latest economic research and the changed operating environment.